I could use some help finding the government's budget balance. Questions 4-7. An economy with no government is described by the following:• Marginal propensity to consumer = 0.8Marginal propensity to import = 0.2Autonomous expenditure = 500• Potential GDP = 15001. The aggregate expenditure function is thus AE =5000.6Y.2. The multiplier is 13. Equilibrium GDP is Y =12504. The output gap is -2505. There is a recessionary + output gap.Suppose now a government is established:Tax rate = 12.5%• Government expenditure = 1001. The new aggregate expenditure function is AE =100.125Y2. The new multiplier is83. The new equilibrium GDP is Y =114.294. The new output gap is1385.715. The government's budget balance function is BB =6. The government's budget balance at the equilibrium iswhich is a7. The structural budget balance is SBB =which is a8. What level of government spending would close the output gap?9. As a result, the government's new (structural) budget balance is10. If the government does not want to increase expenditure to close the output gap, analternative option would be todecrease +taxes

Balanced Budget function is the function of government expenditures and revenues which depicts that…

An economy with no government is described by the following: • Marginal propensity to consumer = 0.8 • Marginal propensity to import = 0.2 • Autonomous expenditure = 500 • Potential GDP = 1500 1. The aggregate expenditure function is thus AE = 500 0.6 Y. 2. The multiplier is 1

An economy with no government is described by the following: • Marginal propensity to consumer = 0.8 • Marginal propensity to import = 0.2 • Autonomous expenditure = 500 • Potential GDP = 1500 1. The aggregate expenditure function is thus AE = 500 0.6 Y. 2. The multiplier is 1

ENGR.ECONOMIC ANALYSIS

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Chapter1: Making Economics Decisions

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Question

I could use some help finding the government's budget balance. Questions 4-7.

An economy with no government is described by the following:
• Marginal propensity to consumer = 0.8
Marginal propensity to import = 0.2
Autonomous expenditure = 500
• Potential GDP = 1500
1. The aggregate expenditure function is thus AE =
500
0.6
Y.
2. The multiplier is 1
3. Equilibrium GDP is Y =
1250
4. The output gap is -250
5. There is a recessionary + output gap.
Suppose now a government is established:
Tax rate = 12.5%
• Government expenditure = 100
1. The new aggregate expenditure function is AE =
100
.125
Y
2. The new multiplier is
8
3. The new equilibrium GDP is Y =
114.29
4. The new output gap is
1385.71
5. The government's budget balance function is BB =
6. The government's budget balance at the equilibrium is
which is a
7. The structural budget balance is SBB =
which is a
8. What level of government spending would close the output gap?
9. As a result, the government's new (structural) budget balance is
10. If the government does not want to increase expenditure to close the output gap, an
alternative option would be to
decrease +
taxes

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